Office-Based Job Losses in New York Amid Pandemic Not Reflected in Sublease Market, Research Shows

NEW YORK CITY–Despite hundreds of thousands of office-based job losses in connection with the coronavirus pandemic, New York City has actually seen a decline in the amount of office square footage available for sublease, according to research from the commercial real estate services and investment firm CBRE Group.

The explanation likely involves several ways in which the pandemic-related economic downturn is unique from past downturns and recessions, the CBRE Group found.

Many of the job losses in New York City, which were estimated at 212,000 through April, are expected to be temporary. Even firms that plan to bring back fewer workers in the long term may want to keep their full space for now, amid new requirements for social distancing, and firms across the board have shown that they are reluctant to make major decisions amid ongoing uncertainty about the economy and public health.

Another issue is straightforward, though it’s likely to be short-lived: pandemic-related restrictions mean that tours of office space are generally unavailable, which slowed the listing of new spaces.

Prior to the pandemic, sublease additions in the Manhattan market averaged between 800,000 and 1 million square feet per month. In May, 234,000 square feet were added to the market, compared to 340,000 square feet in April.

According to the CBRE Group, the amount of sublease space added to the market is likely to increase in the next few months, as companies make decisions about workers’ return to the office and pandemic-related adjustments.

Despite rumors about major Manhattan officeholders looking to shed large amounts of space, the CBRE Group predicted that the volume of sublease space on the market is unlikely to increase above pre-pandemic levels in the next few months. That could delay downward pressure on office rents, though the delay may be short-lived, the group noted.